The U.S. Securities and Exchange Commission (SEC) has reached a settlement with TrueCoin and TrustToken, the companies behind the TrueUSD (TUSD) stablecoin, imposing a $700,000 penalty. The SEC described TrueUSD as a “purported stablecoin,” highlighting allegations that its backers misrepresented the token’s stability and defrauded investors.
According to a complaint filed in the U.S. District Court for the Northern District of California, TrueCoin and TrustToken were involved in the unregistered offer and sale of investment contracts through TUSD, as well as in “profit-making opportunities” from November 2020 to April 2023.
Jorge G. Tenreiro, Acting Chief of the SEC’s crypto unit, stressed the necessity of proper registration to protect investors. “TrueCoin and TrustToken sought profits for themselves while exposing investors to significant, undisclosed risks through misleading claims about the safety of their investment,” he stated.
The SEC’s complaint alleged that TrueCoin and TrustToken falsely marketed TUSD as being fully backed by U.S. dollars or equivalent assets. In reality, a substantial portion of the assets backing TUSD had been invested in a speculative offshore investment fund. In March 2022, both TrueCoin and an offshore entity invested over half a billion dollars of TUSD’s backing into this risky fund.
Despite becoming aware of redemption issues at the offshore fund, TrueCoin and TrustToken continued to make misleading statements, claiming that TUSD was backed one-for-one by U.S. dollars. By September 2024, it was reported that 99% of the reserves supporting TUSD were tied up in this speculative investment.
While neither TrueCoin nor TrustToken admitted to or denied the SEC’s allegations, they have agreed to a settlement that includes civil penalties of $163,766 each. Additionally, TrueCoin will pay $340,930 in disgorgement along with $31,538 in prejudgment interest.
Currently, the TrueUSD stablecoin has a market cap of $495 million and has rebounded slightly after the news, trading at approximately $0.99 at the time of reporting.